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Omnia - Reviewed results for the financial year ended 31 March 2003

Release Date: 12/06/2003 08:55:30      Code(s): OMN
Omnia - Reviewed results for the financial year ended 31 March 2003             
OMNIA HOLDINGS LIMITED                                                          
(Incorporated in the Republic of South Africa)                                  
(Registration number 1967/003680/06)                                            
Share code: OMN  ISIN code: ZAE000005153                                        
("Omnia" or the "Group")                                                        
50 and forward                                                                  
- Revenue up 25%                                                                
- Headline earnings per share up 122%                                           
- Operating profit up 151%                                                      
- Cash flow available from operations 18%                                       
- A new platform for growth established through strategic acquisitions          
- Significant increase in the liquidity of the share to a 54% free float        
Consolidated Income Statements                                                  
For the year ended 31 March 2003                                                
R"000                                              2003      %         2002     
Revenue                                       2 315 078     25    1 851 947     
Cost of sales                                (1 376 023)    14   (1 201 814)    
Gross profit                                    939 055     44      650 133     
Operating costs before depreciation                                             
 and net of other income                       (471 199)     7     (440 549)    
EBITDA                                          467 856    123      209 584     
Depreciation                                    (37 481)    (1)     (38 005)    
Operating profit                                430 375    151      171 579     
Finance costs                                                                   
-  Net interest paid                            (15 922)   (53)     (33 608)    
-  Forward cover costs                          (25 128)   111      (11 912)    
-  Net monetary (loss)/gain                      (8 862)             19 714     
Results of associates                                 -                  (4)    
Profit before taxation                          380 463    161      145 769     
Taxation                                       (139 708)   284      (36 395)    
Profit after taxation                           240 755    120      109 374     
Minority interest                                  (846)    84         (459)    
Net profit for the year                         239 909    120      108 915     
Basic and headline earnings per share (cents)     631,9    122        284,5     
Fully diluted basic and headline                                                
earnings per share (cents)                        598,3    119        273,2     
Dividends per share (cents)                       129,0*                        
Weighted average number of                                                      
shares in issue ("000)                          37 969     (1)      38 277     
Weighted average number of                                                      
 fully diluted shares in issue ("000)            40 097      1       39 867     
Fully diluted earnings (R"000)                  239 909    120      108 915     
EBITDA interest cover                              29,4    371          6,2     
* Dividends comprises 81,5 cents iro of 2002 plus 47,5 cents interim in         
current year                                                                    
Consolidated Balance Sheets                                                     
As at 31 March 2003                                                             
R"000                                              2003        %        2002    
Fixed assets                                    451 996       9      416 565    
Intangible assets                                14 761                    -    
Unlisted investments and loans                      127                  127    
Current assets                                  848 513      53      553 725    
                                              1 315 397      36      970 417    
Equity and liabilities                                                          
Ordinary shareholders" equity                   578 114      24      465 292    
Minority interest                                 2 366       21       1 959    
Deferred taxation                                57 499       56      36 888    
Long-term liabilities                            17 349      (42)     29 963    
Current liabilities                             660 069       51     436 315    
                                              1 315 397       36     970 417    
Net interest-bearing funds / (debt)             252 784             (12 884)    
Net asset value per share (Rand)                  15,32       26       12,20    
Directors valuation of unlisted shares               69                   69    
Capital expenditure                                                             
Incurred                                         86 534               66 818    
Authorised and committed                          5 524                6 530    
Authorised but not contracted for                81 905               53 083    
Consolidated Cash Flow Statements                                               
For the year ended 31 March 2003                                                
R"000                                              2003       %       2002      
Operating profit                                430 375      151   171 579      
Depreciation                                     37 481       (1)   38 005      
Adjustment for non-cash items                   (77 637)           140 175      
Finance costs and taxation                      (55 924)      19   (46 850)     
Generated from working capital                   73 833       74    42 339      
Available from operations                       408 128       18   345 248      
Dividends paid                                  (49 743)                 -      
Cash inflow from operating activities           358 385        4   345 248      
Cash outflow from investing activities          (96 576)     129   (42 152)     
Cash outflow from financing activities          (47 674)     226   (14 608)     
Net increase in cash                            214 135      (26)   288 488     
Net cash/(overdrafts) at beginning of year       57 097            (167 637)    
Effects of exchange rate movements               10 735            (63 754)     
Net cash at end of year                         281 967      394    57 097      
Statements of Changes in Ordinary Shareholders" Equity                          
      Stated      distributable      Retained                                   
R"000      capital      reserves      earnings      Total                       
At 1 April 2001                       65 513     48 896    196 350  310 759     
Net profit attributable to                                                      
 ordinary shareholders                                     108 915  108 915     
Increase in foreign currency                                                    
 translation reserve                             47 114              47 114     
Transfer to income statement of                                                 
 post-acquisition retained earnings                                             
 and reserves of associates                        (720)       720              
Treasury shares                       (1 496)                        (1 496)    
At 31 March 2002                      64 017     95 290    305 985  465 292     
Net profit attributable to                                                      
 ordinary shareholders                                     239 909  239 909     
Decrease in foreign currency                                                    
translation reserve                            (70 918)            (70 918)    
Treasury shares                       (6 865)                        (6 865)    
Ordinary dividends paid                                    (49 304) (49 304)    
At 31 March 2003                      57 152     24 372    496 590  578 114     
Segmental Analysis                                                              
For the year ended 31 March 2003                                                
R"000                                              2003        %        2002    
Revenue                                       2 315 078      25    1 851 947    
Fertilizer                                    1 928 184      28    1 506 268    
  - Less: Intersegmental sales                 (128 759)     45     (89 034)    
Explosives and Chemicals                        515 653      19      434 713    
Operating profit                                430 375      151     171 579    
Fertilizer                                      373 536      187     129 978    
Explosives and Chemicals                         56 839      37      41 601     
These condensed consolidated preliminary financial statements are prepared      
in accordance with RSA GAAP and schedule 4 of the South African Companies       
Act. The accounting policies used in the preparation of the preliminary         
financial statements are consistent with those used in the annual financial     
statements for the year ended 31 March 2002.                                    
The future minimum lease payments under non-cancellable operating leases are    
R4,0m within one year and R7,5 between two and five years, giving a total of    
The hyperinflation adjustments, as required by the accounting standard AC124    
"Financial Reporting in Hyperinflationary Economies", result from the           
continued devaluation in the Zambian Kwacha and the Zimbabwean Dollar. The      
most significant adjustment is that which reduced the gross profit for the      
year by R8,2 million. The net monetary loss of R8,9 million for the year is     
as a result of a change in the source of funding of the Zimbabwe business,      
and is offset by foreign exchange gains of R33,6 million in Zimbabwe and        
Zambia. The net impact to the group, including the offsetting foreign           
exchange gains, is a net profit of R15,6 million.                               
Non-cash flow items on the cash flow statement comprise foreign exchange and    
FCTR movements and hyperinflation adjustments.                                  
Dividends of 81,5 cents and 47,5 cents per share were declared on 10 June       
2002 and 13 January 2003 respectively. These dividends are reflected in the     
current year ended 31 March 2003.                                               
On 2 February 2003, the Group acquired the business and assets of HRL           
Agriculture (Proprietary) Limited (an Australian company) for a purchase        
consideration of approximately R4,1 million. Goodwill of R1,4 million, being    
the excess of the purchase consideration over net assets acquired was           
recorded and is being amortised on a straight-line basis over 5 years.          
On 4 March 2003, the Group acquired the business and certain tangible and       
intangible assets of Delta Caps International (a company incorporated in        
France), for a purchase consideration of approximately R15 million. The         
purchase consideration has been allocated to tangible assets (R0,6 million)     
and intangible assets (R13,9 million). The intangible assets will be            
amortised over their estimated useful lives.                                    
The preliminary results have been reviewed by the auditors,                     
PricewaterhouseCoopers Inc, and a review opinion is available for inspection    
at the company"s registered office. The review performed by                     
PricewaterhouseCoopers Inc does not include the pro-forma financial             
information for the Prochem acquisition.                                        
Subsequent to the year end, on 3 June 2003, the company acquired 100% of the    
business of Prochem as a going concern for a cash consideration of R541,8       
million and assumed debt of R76 million. This acquisition will be accounted     
for using the purchase method of accounting. This transaction will become       
effective after all the suspensive conditions have been met, which is           
expected to be 1 September 2003. The intangible assets (including goodwill)     
which will be acquired as part of this transaction will be amortised over       
their expected useful lives, which is expected to be 20 years.                  
Omnia is a specialist chemical services company providing customised            
solutions in the agricultural, mining and industrial chemical markets.          
Strategic Review                                                                
The year to 31 March 2003, fittingly for Omnia"s 50th year of existence, has    
been one of the most exciting and successful in its history. The Group          
achieved an exceptional financial performance, with record profits and cash     
generated from operations. Given the Group"s positive cash position, and in     
line with the strategy of diversifying into new domestic and global markets     
to balance the portfolio of businesses, the Board mandated management to        
investigate a number of acquisition opportunities in each of the Group"s        
areas of expertise.                                                             
The expansion opportunities that have arisen from this process are as           
The acquisition of a small humate producer in Australia. Humates are an         
increasingly important component in speciality fertilizer, particularly as      
the demand for organically based fertilizer grows.                              
The ongoing formalisation of various speciality fertilizer joint ventures in    
Western and Eastern Australia, as well as New Zealand.                          
The Group"s mining business, Bulk Mining Explosives (BME), procured the         
global rights to cutting-edge technology from French company Delta Caps         
International (DCI). The acquisition positions BME amongst the leading          
sources of electronic detonators in the world.                                  
Subsequent to the year-end, the industrial chemicals business acquired the      
Prochem Group of companies ("the acquisition"), the leading chemical            
distribution company in South Africa. The acquisition of this strong service-   
based chemical distribution business, focused on the customer interface,        
provides immediate low-risk access to in-depth knowledge of relevant            
chemical markets and will provide Omnia with a more diversified portfolio of    
businesses, with a better balance between the agricultural and chemical         
interests.   Finalisation of the acquisition is subject to shareholder          
approval and other regulatory issues. The pro forma financial effects of the    
Prochem acquisition are set out separately below.                               
These strategic developments in each of Omnia"s business units represent a      
carefully considered and decisive move to position the Group for sustainable    
profitable growth into the future. The acquisitions will diversify and          
significantly enlarge the Group, resulting in a lower relative exposure to      
Southern African agriculture, while retaining the essential Omnia business      
model of adding value to customers by leveraging its intellectual capital       
and technology.                                                                 
Financial Review                                                                
Revenue increased by 25% to R2,3 billion (2002: R1,9 billion) due to volume     
and price increases following the weakening of the Rand prior to last year"s    
planting season.                                                                
The Group"s success in leveraging its business model across all its markets,    
excellent export earnings and the settlement of an insurance claim resulted     
in an increase in the operating profit margin from 9% to 19%, giving impetus    
to the growth in headline earnings. After the 455% increase achieved last       
year (although off a particularly low base), a further 122% increase was        
achieved in the year under review to reach 631,9 cents per share (2002:         
284,5 cents per share).                                                         
The Group ended the year in a net positive funds position of R253 million       
(2002: net debt of R13 million) after the set-off of interest bearing debt.     
Our substantially improved balance sheet has enabled the Group to negotiate     
better payment terms, reducing net working capital levels. The resultant        
lower financing costs are now covered 29 times (2002: 6 times).                 
A number of factors influenced the records achieved.                            
Relatively high produce prices prevailed last year, mainly due to a weak        
Rand and high demand fuelled by a regional maize shortage. This resulted in     
improved cash flows and improved debt positions for farmers, which in turn      
increased expenditure with input suppliers.                                     
The long outstanding loss of profits claim for a compressor failure at the      
Sasolburg plant during 2000 was finally settled with a payment of R27,4         
million during the latter half of the year. The claim compensated the Group     
for the higher cost incurred in importing alternative raw materials during      
the time the plant was not operational.                                         
A toll production contract for a third party was in existence for the major     
part of the year, which allowed the Group to maximise the utilisation of        
production capacity.                                                            
Shareholders were informed in the interim announcement that the South           
African Revenue Services (SARS) intended to disallow a portion of the           
interest claim in respect of the convertible loan arrangement that was          
entered into in December 1997 to fund a new granulation plant in Sasolburg.     
SARS has issued the assessment and a provision for the additional tax charge    
of R19,5 million for prior years has been included in the tax charge for the    
year under review, notwithstanding that an objection to the assessment will     
be lodged.                                                                      
With the strengthening of the Rand, the Foreign Currency Translation Reserve    
(the major component of the non-distributable reserves) reduced by an amount    
of R71 million. This represents a net reduction of around R24 million in the    
Foreign Currency Translation Reserve when offset against the gain recorded      
in the previous year.                                                           
Capital expenditure totaled R87 million for the year (2002: R67 million).       
Notable capital expenditure items were the building of a new solid calcium      
nitrate plant in Sasolburg, the building of ammonium nitrate storage dams at    
Dryden and the expansion of direct applied ammonia equipment. These items       
totaled R18 million, with the balance being ordinary replacement capital.       
Operational Review                                                              
The Fertilizer Division saw an increase in revenue of 27% (2002: 23%) over      
the year. This was mainly due to strong demand following the increase in        
maize plantings and a 23 % increase in the volume of export sales over the      
comparable period last year. Good export sales during a period of Rand          
weakness, a strong performance from Omnia Speciality Fertilizers and the        
payment of the Sasolburg compressor insurance claim were the main               
contributors to increasing the operating profit margin from 9% to 21%.          
Although the Rand appreciated strongly against the US Dollar over the last      
year, this recovery only commenced after the bulk of Fertilizer orders had      
been finalised. The Group therefore avoided the impact of the strengthening     
Rand on its product prices in the year under review.                            
Mining and Industrial Chemicals                                                 
The Mining Explosives and Industrial Chemicals businesses experienced a 19%     
growth in revenue to R515 million (2002: R435 million) and a pleasing 1,5%      
improvement in operating margin to 11%.                                         
BME again saw gradual growth in volumes, while continuing its expansion into    
Dollar based markets within Africa. BME succeeded in expanding its customer     
base, added a new start-up operation to its bulk explosives division and        
doubled the monthly volumes of packaged cartridge explosives.                   
During the year, the Industrial Chemicals business, Intaba, invested in         
enhancing its technical support teams and continued to show pleasing growth     
in the animal feeds market, with the development of new product ranges.         
The acquisition of Prochem will provide an established chemical distribution    
network across South Africa, serving to strengthen Omnia"s interface with       
customers. Prochem has grown organically over its 40 years in existence and     
has consistently delivered strong results, with current turnover in excess      
of R1,5 billion, and compounded growth over the last five years in excess of    
20% per annum. Through the critical mass the acquisition gives Omnia"s          
industrial chemicals business, it has positioned the Group strongly to          
benefit from opportunities in this area.                                        
Pro Forma Financial effects of the Prochem Acquisition                          
In terms of the agreement signed on 3 June 2003, Omnia will acquire the         
business of Prochem as a going concern for a cash consideration of R541,77      
million and the assumption of an estimated R 76 million in interest-bearing     
debt.  Details of the Prochem acquisition were set out in an announcement       
dated 5 June 2003.                                                              
Based on Omnia"s reviewed results as at 31 March 2003, the pro forma effect     
of the Prochem acquisition on the headline and basic earnings, fully diluted    
headline and basic earnings, net asset value and tangible net asset value       
per share would have been as follows:                                           
                              Note      Reviewed       Pro forma                
                                        before the     after the                
Prochem        Prochem        %         
                                        acquisition    acquisition    change    
Net asset value                                                                 
per share (cents)             2         1 532          1 567          2,3       
Tangible net asset                                                              
value per share (cents)                      2         1 493          145       
Basic earnings                                                                  
per share (cents)             3         631,9          613.2          (3,0)     
Headline earnings                                                               
per share (cents)             3         631,9          675.1          6,8       
Fully diluted                                                                   
basic earnings per share (cents)                  4         598,3               
581,8          (2,8)                                                            
Fully diluted                                                                   
headline earnings per share (cents)               4         598,3               
640,5          7,0                                                              
Actual number of                                                                
shares in issue (000"s)                           37 885         39 310         
Weighted average                                                                
number of shares in issue (000"s)                      37 969         39 394    
Weighted average                                                                
number of fully diluted shares in issue (000"s)        40 097         41 522    
The pro forma financial effects in the "After" column are based on the          
following assumptions:                                                          
The consideration of R 541,77 million was financed by:                          
R187,97 million cash resources;                                                 
R318,17 million borrowings;                                                     
R35,63 million by the issue of new Omnia shares;                                
The effect on net asset value and tangible net asset value per share assumes    
that the acquisition had been implemented on 31 March 2003 and is based on      
the actual number of shares in issue;                                           
The calculation of the basic earnings and headline earnings per share           
assumes that the acquisition was effected on 1 April 2002 and is based on       
the actual number of shares in issue and that:                                  
the tax rate was 30%;                                                           
the interest expense assumed by the Group in respect of the Prochem             
acquisition was calculated as follows:                                          
borrowings at 15% per annum before tax; and                                     
cash at 10% per annum before tax;                                               
The calculation of the fully diluted basic and headline earnings per share      
assumes that the acquisition was effected on 1 April 2002 and is based on       
the weighted number of shares in issue;                                         
The new Omnia Holdings shares to be issued as part settlement of the            
purchase consideration have been based on a price of R25,00 per share;          
The intangible assets, comprising goodwill, trademarks, patents and know-how    
acquired by Omnia have been amortised over a period of 20 years. The basic      
earnings per share is arrived at after the amortisation of the intangible       
assets arising from the acquisition. Such amortisation is mandated in           
accordance with current accounting standards.                                   
Prochem operates in the services industry and as such does not utilise a        
large asset base. The Prochem acquisition incorporates a number of patents      
and trademarks and accordingly the dilutionary impact on Omnia"s tangible       
net asset value is significant.                                                 
Outlook for the Group                                                           
As mentioned, the year under review has been outstanding. A combination of      
events and circumstances prevailed that will not necessarily re-occur in the    
forthcoming year:                                                               
The payment of the loss of profits claim of R27,4 million is a once-off         
Market conditions generally have changed dramatically in recent months.         
Tighter conditions in all our markets are anticipated in the year ahead,        
specifically considering that the world economic recovery after the             
recession of 2001 is less than optimistic.                                      
Although the Group largely avoided the impact of the Rand recovery on the       
fertilizer business during 2002, the apparent resilience of the Rand can be     
expected to have a negative impact on results in the coming year. However,      
this impact will be cushioned by an increase in the US Dollar denominated       
Fertilizer commodity prices. It is also expected that the low levels of         
world grain stocks will lead to an increase in the Dollar price of grain        
products.  However, until that occurs, the pressure on the cash position of     
farmers will remain as grain prices in the country have reduced. We             
therefore do not envisage a repeat of early orders and payments as happened     
last year.                                                                      
The relatively high grain prices in the previous year led to an increase in     
hectares planted to maize. It is expected, given the current lower grain        
prices and degree of over-supply, that the hectares planted in the year         
ahead will contract moderately.                                                 
The acquisition of Prochem is large relative to Omnia"s market                  
capitalisation and will increase debt levels in the short term. However,        
with the strong cash flow generation of both Omnia and Prochem, the debt is     
expected to reduce quickly, aided by expected lower interest rates in the       
foreseeable future. With its low need for capital expenditure Prochem"s         
utilisation of cash is low, resulting in the rapid enhancement of earnings      
as the debt is redeemed.                                                        
During the coming year, the Group will focus on identifying the inherent        
synergies and opportunities across all the businesses and consolidating         
operations for optimal efficiency. Earnings are however not expected to         
match those that were achieved in this past exceptional year, although they     
can be expected to revert back to the earnings growth trend over the past       
few years.                                                                      
Share Liquidity                                                                 
The liquidity of the Omnia Holdings" shares on the JSE Securities Exchange      
SA has significantly increased. As at the end of March 2002, Omnia Holdings"    
share register indicated a free float of only 21%. This free float has grown    
to 54% as at 31 March 2003, while the monthly average shares traded             
increased by 394% to an average of 589 000 shares per month since the sale      
of the 34.5% shareholding held by Alpha.                                        
Notwithstanding the exceptional results, taking into account the Prochem        
acquisition, the Board has followed a conservative approach regarding a         
dividend for the year. The Board declared a final dividend of 72,5 cents per    
share. This, together with the interim dividend of 47,5 cents per share paid    
in January, amounts to a total dividend for the year of 120 cents per share,    
an increase of 47% over the previous year and a dividend cover of 5,3 times     
(2002: 3,5 times).                                                              
The last day to trade in the company"s shares for purposes of entitlement to    
the final dividend is Friday, 27 June 2003.  The shares will commence           
trading ex dividend on Monday, 30 June 2003 and the record date will be         
Friday, 4 July 2003.  The dividend will be paid on Monday, 7 July 2003.         
Share certificates may not be dematerialised or rematerialised between          
Monday, 30 June 2003 and Friday, 4 July 2003, both days inclusive.              
NJ Crosse                               RB Humphris                             
Chairman                                Managing Director                       
Johannesburg                            3 December 2002                         
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH       
Fitz-Gibbon, RB Humphris* (Group Managing Director), Prof SS Loubser, Dr WT     
Marais (Alternate to WT Marais), WT Marais (Deputy Chairman), JG Pretorius,     
PA Springett                                                                    
*Executive Directors                                                            
Registered office                                                               
1st Floor, Omnia House, 13 Sloane Street, Epsom Downs, Bryanston, Sandton       
PO Box 69888, Bryanston 2021                                                    
Telephone (011) 709-8888                                                        
Transfer secretaries                                                            
Ultra Registrars (Pty) Ltd                                                      
11 Diagonal Street, Johannesburg 2001                                           
PO Box 4844, Johannesburg 2000                                                  
Date: 12/06/2003 08:55:41 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             

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